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UPDATED 22/1/07

Valuation of Chaco Resources : 'Rule of Thumb' based on 550m shares and using 10% DCF on oil at $60/barrel is 1p on the sp for every 1m barrels (CHP's share) that is proved. Until oil reserves are proven the 1p/1m barrels will be discounted by the market.

Chaco Resources now has three exploration blocks in Colombia and three areas in Paraguay. The next year should see a steady news flow as it establishes the companys transformation from being an exploration company only to also becoming a significant oil production company. Set out below are some of the milestones which should produce announcements and have a positive effect on the share price. All reserves are quoted in recoverable oil assets.



Alea, Colombia :

25% interest in a field currently assessed at holding 38.1m barrels of light sweet crude oil. Drilling of the field by the operating partner, Ecopetrol, was programmed for 2006 to provide early cash flow, but a shortage of drilling rigs, then the rainy season and increased environmental requirements have caused a re-think and it is now expected that this block will be drilled in first half 2007.The proposal to drill a step out well as part of that drilling programme will also provide the opportunity to establish if the estimate of recoverable oil should be increased. (Some estimates suggest the field contains as much as 70m barrels.)

RNS : Updated w/c 30/4//07. Drilling contract should be imminent but actual drilling unlikely to take place second half 2007.



Puerto Lopez, Colombia :

54% Interest in a field containing light sweet crude oil.On 3.10.06 CHP announced that the original TEA area had been extended by the ANH to include further territory which it is expected will greatly increase the potential to find and exploit a structure which may contain as much oil as there is believed to be in Primavera, where Hardman and Co estimate that there is a potential value of 120p per CHP share.

RNS :Updated 22/1/07. Further seismic now obtained and decision not to proceed made because closures too small to be economic and drilling funds earmarked for this project now being retained for use on a more prospective block yet to be announced



Primavera west, Colombia :

55% interest. Two shallow drills in April turned out to be dry. Areas adjacent to this block contain oil (Cana Limon, also in the Mirador basin, the largest oilfield so far, 1.8b barrels) Chaco believe that the area in their block contains the thicker end of a wedge shaped oil-bearing sandstone structure; the area to the east in the neighbouring block has been estimated as containing 400m barrels and the El Miedo oilfield, 8 kms.away has 325m barrels. ANH Contract signed w/c 8/5/06 (1 week sooner than forecast). GED are drilling their neighbouring block in February 2007; two of their targets may contain oil deriving from Chaco's area so some earlier cash flow may result.

RNS : The drilling programme has now been completed but the company has yet to say whether the block will be explored further or abandonned.

New block announced in April known as Tigra in the Magdelana Basin. CHP has a 48.75% interest. Believed to be very promising but company is doing 3-d seismic over the next 18 months with drilling projected in the following 16 months. (Timescales seem to be set to allow a lot of room for delays or speeding up if progress is easier than anticipated)



Curupayty Block, Paraguay :

1.39m hectares in north, close to Bolivia. Two wells previously drilled and both showed oil.

RNS : Expect partnership with larger producer.



San Pedro Block, Paraguay :

1m hectares in south-east. Previous drilling showed oil.

RNS : Expect partnership with larger producer.



Parana Basin, Paraguay :

Canindeyu block covering 1,789,000 hectares. Bordering Brazil. Oil field on Brazilian side already drilled. Chaco also expect to find oil and, at a deeper level, considerable quantities of gas. Chaco has obtained valuable historic seismic for re-evaluation.

RNS : Presidential Decree received 2/11/06.. Petrobras has announced its intention to increase substantially its effort to exploit Paraguay's hydrocarbons and has announced a farm-in on CDS's adjacent block. Possibility that they or another major will do likewise with CHP



Corporate Activity :

CHP obtained an independent evaluation of their exploration assets by Hardman and Co., during July 2006.This is updated monthly. As Chaco Resources line up their assets ready for production they may attract a bid. There are also other actions that the mgt. could take to increase the Chaco's asset share subject to negotiation since the position of the Colombian state oil company, Ecopetrol, is believed to be under review. Other actions could be taken which would have the attraction in bringing more resources to bear on a quicker timeframe plus help streamline the management of their assets. De-merging the Colombian and Paraguayan assets at an appropriate time might hold out some advantages to shareholders at some stage.
Last Placing announced at 15.1p per share on 18/5/06.
Chairman and FD bought shares 8/06 and the Chairman recently exercised his option on further shares which would suggest that he regards the share price to be going north from here on.
Updated 22/1/07.




Here are some dates for your diary courtesy of KJKelly, who posts on ADVFN

1. Curupayty - complete reprocessing of seismic by end July 06
2. Curupayty - complete interpretation of seismic by end August 06
3. Curupayty - decide whether to proceed to drilling or proceed with a farmout campaign - end September 06
4. Platanillo - commence re-entry of Alea 1 early in 1st quarter 2007
5. Primavera - two structural targets will be selected from 10 potential targets for drilling commencing Feb. 2007.
6.Hardman updates should now happen monthly.

FG...would you be kind enough to indicate L2?

3 v 1
13.75. 14.25

lizard would you be so kind as to furnish the same info for goo?,looking good this am.

MPH,

If you are about and have time can you do some tidying up over on advf.
That Daneth guy is just a spoiler of the thread imo.

Regards,

stuart.

ct- L2 goo.

1 v 2
7.5 -8

thx lizard

thanx mph.

sharesure have started drilling thanks,

Tanker, A week ago it was imminent; have you had it confirmed from somewhere? I hadn't expected there to be a formal announcement about the commencement of drilling since CHP have already said that they were going to drill in the first half of March. If there was a problem which would delay it then they would have to.
Anyone got a contact with GED or their operator since their RNS, which seems to be very promising, has only produced a fall in their sp.?

Obviously, MM's trying a last minute tree shake.

Are you serious ? CHP trading today is a sea of red . Considering the size of some of the plethora of sells today including one for 1m, i personally think the mms have been very generous. A tree shake ?....naaaah .At best interpretation mms are collecting a little stock for the battle yet to be won or lost on this one.

Sorry TFC, I disagree. purchases at 8 for every 2 sold when MM's moved the price down. This in turn encouraged daily traders to jump ship, in my book a tree shake.

Oilyrag, For what it's worth that 1m at end of day was apparently a buy by a poster on ADVFN called Russian; his order had been in all day and according to him the bid was dropped to fill it. Apparently he already has a big holding in CHP and GED. Claims he is thinking of buying more - hope he doesn't if the price drops to accommodate him. Whether all that is true will probably become clear over the next two days.

tfc -? 1m was a buy.

Excellent piece on oilbarrel today:-
http://www.oilbarrel.com/home.html

share sure , i ment have they started sorry ,

CEY , is going to fly by month end ,make some money.

One can but hope Tanker old chap ..Cey is one of my biggest smallcap holdings bought at 13.75p .....,,,Erratum >>>>>. tHE 1M trade was indeed a "buy" ...l was away from my desk and home pc yesterday - both of which use level 2 and was using my g/fs pc which relies on the dire service provided by money a.m.s normal trading format ..........Apologies to all ; no skullduggery or deception intended ......

.

http://www.oilbarrel.com/home.html

New Look Chaco Resources Prepares To Spud Maiden Well
There has been a round of musical chairs at AIM-quoted Chaco Resources, which is seeking to expand its holdings in South America. The company, which last month raised 1.9 million to help progress its exploration projects and chase new ventures, has a new chair and chief executive in the shape of Majestic Wine founder Giles Clarke and Dr John Wardle respectively. Wardle has been promoted from his previous role as country manager in Colombia. The current chair Jon Pither will become deputy chair and current CEO John Morris, who has been with the company since its founding ten years ago, will become a non-executive director.

The changes come as the company, which takes its name from a region of northern Paraguay, prepares to drill its maiden well in what is set to be a busy year. It has taken a while to get to this point, with drilling plans pushed back from last year due to rig shortages, onerous environmental and social laws and, on the Platanillo Block where Chaco is partnered by state firm Ecopetrol, time-consuming tendering and operating procedures.

But, at last, the company is gearing up to spud the Cachapa-1 exploration well on its Primavera Block in Colombia. This is the first of a four-well programme planned for the Primavera (Chaco 55 per cent) and Platanillo (25 per cent) blocks.

Primavera lies in the northeastern part of the Llanos Basin. This is an area that has been widely overlooked because of local security concerns, which have now been largely resolved. The crude in this part of the basin is expected to be heavy and will trade at a discount but, given that oil prices continue to bubble around the US$60 mark, this is no reason not to pursue exploration opportunities.

Existing wells to the east of the block found good oil shows in the 1980s including one, El Miedo-4, which recovered 97 barrels of 19-degree API oil in eight hours. It appears that these old wells were not properly sited and failed to intersect a closed structure: the application of modern seismic could unlock the dormant potential of this heavy oil area.

Chaco has identified two targets in the north of the block. Cachapa-1 will test the Carbonera Sandstones, which are known to be productive in this region (and were the source of the El Miedo-4 oil). Cachapa will be followed by a well on the Capibara prospect.

On the Platanillo Block, which lies in the Putumayo Basin on the Ecuadorian border, Chacos drilling plans will focus on the Alea oil accumulation. This field was tested by previous operator Repsol back in 1988, when Alea-1 flowed at 533 barrels per day. Back then the oil price was low, Colombias fiscal regime was punishing and the security situation was a concern. Those dynamics have changed to such an extent that Repsol, the oil firm that allowed the field to lie dormant in the wake of the 1988 test, has now decided to stick with the project and help move it forward.

The Alea field is thought to hold P90 resources of 7.4 million barrels of crude in the Lower U sands with mean contingent and prospective resource of 20.6 million barrels. There is additional potential for a further 16.7 million barrels in the higher risk and untested Upper U sands. The field partners plan to re-enter Alea-1 and also intend to drill a step-out well to define the possible extent of the accumulation.

This all adds up to a busy year and one that could help Chacos transition from explorer to producer. Its quite a change for a company that started life gold mining in Sardinia but three years ago decided to enter the oil and gas business with a starter pack of exploration acreage in Paraguay. However, it soon became apparent that Colombia was where the real opportunities lay as the country overhauled its fiscal and licensing terms to create one of the most favourable investment climates in the world for start-ups.

But not everything in Colombia is worth pursuing. Chaco has decided to ditch the Puerto Lopez block after seismic data indicated that two leads once deemed promising are not large enough to be commercially viable. The write-off on the project is not expected to exceed 900,000. Outgoing technical director Graeme Stephens said the decision meant the company could devote funding which was earmarked for drilling in this block for targets of higher potential. The company hopes to make announcement shortly about one such new opportunity.

In Paraguay the company now holds three exploration areas, having been awarded the Alto Parana Block in November. This large block, formerly known as the Canindeyu Block, lies in the Parana Basin next to the border with Brazil and covers an area equivalent to over 200 North Sea blocks. This is real frontier stuff however, and investors will rightly be focused on the newsflow from Colombia for the short to medium term.